Nothing happens overnight. An overdraft is repayable on demand, but banks have to follow set steps before a default or court, and at almost every step you can stop things going further by agreeing a plan you can afford.
Here's how it usually unfolds, roughly in order, and what you can do at each point.
Stage 1: You're overdrawn and not clearing it
An arranged overdraft has no end date and no monthly payment, so staying overdrawn isn't a breach on its own. The cost is the interest: at around 40%, £1,500 costs about £43 a month. If you're at your limit, that interest can tip you over it and payments can be refused.
What you can do: stop using the overdraft for spending and put your own numbers into the payoff calculator to see what clearing it would take.
Stage 2: The bank gets in touch
Banks have to look out for customers who are in their overdraft most of the time and contact them. This isn't a demand for the money. It's the point where they're most willing to help.
What you can do: reply. If the bank is taking your wages to cover the overdraft, you can use your first right of appropriation: ask it to let your income pay essential bills first. Offer an amount you can keep up each month and ask whether they'll freeze interest and fees. If they freeze interest, £1,500 at £100 a month is cleared in 15 months with nothing extra on top.
Stage 3: Your limit is cut
The bank can reduce or remove your limit and ask you to bring the balance down. It's usually done in steps, often over about three months, rather than all at once.
£1,500 at 39.9% EAR cleared over | Monthly payment | Interest paid |
|---|---|---|
3 months | about £529 | about £86 |
6 months | about £275 | about £152 |
12 months | about £149 | about £291 |
24 months | about £87 | about £589 |
What you can do: if £500 a month isn't realistic, tell the bank before the first cut and ask for a longer plan. It costs more interest, but a plan you keep up beats one you miss.
Stage 4: A default notice
If you don't pay and haven't agreed anything, the bank can send a default notice. It must give you at least 14 days to put it right or agree a payment plan.
What you can do: this is the last easy exit. Contact the bank or a free debt adviser within those 14 days.
Stage 5: The account is defaulted
The account is closed and the debt may be passed or sold to a debt collector. The default stays on your credit file for six years, even once it's paid.
What you can do: you can still agree an affordable plan with whoever now owns the debt. Paying it off marks the default as satisfied, which looks better to future lenders.
Stage 6: Court, as a last resort
If there's still no payment or plan, the bank or collector can apply for a county court judgment (CCJ) in England and Wales. Scotland and Northern Ireland have their own court processes. In England and Wales, the lender must first send a letter before claim giving you 30 days to reply, and court is much less likely if you've stayed in touch and are paying something.
What you can do: reply to that letter within the 30 days and never ignore court papers. Get free advice straight away.
Two things that protect you at any stage
Open a basic bank account elsewhere. Your bank may be able to take money from other accounts you hold with it to cover the overdraft. Having your wages paid into a basic account at a different bank means you can pay rent, council tax and energy first, then the overdraft at a rate you've agreed.
Get free advice early. StepChange, National Debtline and Citizens Advice can deal with your bank for you and look at all your debts together. You'll find them on our financial resources page.
If you can pay something each month, how to pay off an overdraft has a plan to get back into the black, and can you pay off an overdraft with a credit card? covers moving it to a cheaper rate. If your debts are more than you can manage, see debt management plan vs IVA.
Examples assume a fixed 39.9% EAR, monthly interest, no new spending and no fees. Your bank's rates and how it handles arrears may differ. This guide is general information, not financial advice.